BAKU, Azerbaijan, June 30
By Leman Zeynalova – Trend:
Iraq’s actual ability to cut more barrels is limited to between 300,000 and 500,000 barrels per day (bpd), Trend reports citing Rystad Energy.
Iraq produced more than 650,000 barrels per day above its target output level in May and is now being asked to make up for its non-compliance in future months.
The company believes that a reason for Iraq’s under compliance is its very urgent need to use oil export revenues to help build up its gas production potential to meet surging demand.
“Achieving any output target below 4 million bpd is overambitious given Iraq’s dire economic need for oil revenues right now. Out of the 650,000 bpd, Iraq has asked international companies such as BP, ExxonMobil, and Lukoil to help out with 350,000 bpd of cuts in the Basrah region, and the state operator – Basra Oil Company (BOC) – to cut the remainder 300,000 bpd,” reads the report of Rystad Energy.
Iraq committed to OPEC to produce 57,000 bpd below its target production level of 3.75 million bpd in July and then go deeper and come in 258,000 bpd below in August and September against the slightly higher target production level of 3.96 million bpd. “There is even talk of trying to get Kurdistan to contribute with 100,000 bpd of production cuts – an effort we believe to be futile.”
“Even before Covid-19 hit, Iraq and the rest of OPEC+ were cutting production to manage the market. Then, after the group failed to renew the agreement in March it was an all-out production war. But Iraq failed to ramp up production, so when the deeper cuts started in May, most BOC fields were already at near-compliance levels, leaving little to cut,” says Rystad Energy’s senior analyst Aditya Saraswat.
Lower oil demand amid Covid-19 has forced about 300,000 bpd in production cuts in Iraq, as buyers in lockdown in Asia either canceled orders or storage became limited. PetroChina had to halve production at Halfaya field down to 200,000 bpd. Petronas had to shut down 100,000 bpd of production capacity at Garraf due to quarantine measures taken to protect workers. In short, Covid lockdowns are a natural force in keeping oil in the ground and bringing Iraq closer to compliance. A swifter return to the ‘normal’ would adversely affect the country’s compliance.
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